5. DAOs - Decentralised Autonomous Organisations

Decentralised Autonomous Organisations (DAOs) are among the most cutting-edge institutional and social innovations enabled by blockchain. At their core, DAOs enable a new form of purpose-driven collaboration. A novel organisational entity through which, theoretically, any group of people at any scale can collaborate on a shared cause and collectively govern organisational operations in a decentralised, non-hierarchical and democratic manner.

The key components of a DAO are its governance mechanism and native token. The governance mechanism, which includes rules and decision-making processes, is agreed upon by members and encoded into smart contracts on a blockchain, making decisions transparent, secure and enforceable. A token can then be issued to raise capital, incentivise members and distribute voting rights. Proposals for initiatives can usually be made by any member regardless of role or status and decisions are made through a smart-contract-based voting process. Once a consensus is reached, a smart contract automatically executes the decision and, for example, allocates funds for its implementation. Such automation and disintermediation of organisational processes can improve efficiency and enable digital communities to create real-world impact.

Key attributes that distinguish DAOs from traditional organisations include:

• Decentralisation: DAOs operate based on the consensus of their members, rely on smart contract-based infrastructures, and require consensus for any change to their underlying rules. This potentially promotes a more democratic governance model than in traditional organisations and could make them suited for addressing complex social and environmental issues.
• Transparency: DAOs promote accountability and trust by recording every activity, vote or transaction on an open ledger that is accessible to all members.
• Every participant is an owner: DAOs foster a sense of shared ownership and agency among members, where token holders have an equal say and a share of profits.
• Cross-border, permissionless participation: Most DAOs allow anyone to become a member and operate independently of geographic borders, enabling a global community of members to collaborate on shared causes. This allows the potential for more inclusive and diverse participation compared to traditional organisations, which may have limitations on membership and geographic boundaries.
• Merit-based, non-hierarchical structure: DAOs allocate roles, rights and responsibilities based on contributions as voted by members. This can provide great opportunities for talented individuals without formal qualifications and further deepen members’ sense of agency and commitment.
• Incentivisation: Members are incentivised to act in the best interests of the DAO through token-based rewards systems, promoting behaviour which is aligned with the organisation's goals.
• Automation: DAOs can be programmed to carry out tasks like executing decisions and distributing rewards automatically, reducing operational overhead and increasing efficiency.
• Collaboration at scale: The fact that DAOs are decentralised, automated, facilitate trust and are borderless enables collaboration at scale, potentially harnessing an unprecedented number of participants to address complex local and global issues.
• Evolution: Like biological organisms that evolve to better suit their environment, DAOs can continuously adapt their governance and organisational processes based on the changing needs and goals of their members, making them potentially quicker and more adaptable than traditional established organisations. This flexibility is achieved by revising the base protocols and smart contracts on the blockchain, with the condition of members’ consensus to do so.
• Faceless: DAOs often do not require members to share their personal identities, providing anonymity and privacy. This offers opportunities for underrepresented groups and promotes equal participation based on contributions rather than identities.
• Hive mind: By drawing on the collective knowledge and ideas of all members, DAOs may enable a more informed and innovative organisation. Members share their knowledge, skills and experiences to create a collective intelligence that is potentially greater than the sum of its individual parts.

There is no 'one way to DAO’. The above attributes can vary greatly between different DAOs, reflecting their fluid nature. A DAO can be established by a community for any desired purpose, in a manner that aligns with their own needs and choices.

Today, there are estimated to be around 10,000 active DAOs governed by more than 5 million members worldwide, collectively overseeing more than US $14 billion (DeepDAO, 2023). Some members work full-time for DAOs and, in some jurisdictions, DAOs have been recognised as a distinct type of legal entity. These range from venture capital groups and those promoting research democratisation and acceleration to those focused on collective grant-making, and even those aimed at building and governing their own cities.

With the concept still in its infancy, DAOs face significant challenges, such as: 

• Regulatory hurdles: As regulatory frameworks are still evolving and uncertain, DAOs who seek to generate revenue for stakeholders often find it challenging to comply with the regulations of multiple jurisdictions.
• Technological limitations: At this point in time, the interfaces through which DAOs operate lack the user accessibility required for wider adoption and use.
• Governance structures: Decentralised governance models may not always work as intended, leading to a concentration of control in a small group or inhibiting timely decision-making. Governance attacks by actors with conflicting objectives may also be a concern. As organisations that are striving to be democratic and non-hierarchical, DAOs are still experimenting with various kinds of governance in order to define the best balance between democracy and efficiency.
• Crypto-related risks: Fluctuations in cryptocurrency values, coding flaws, and cybersecurity breaches may pose risks to the funds held in DAOs’ treasuries.
• Securities law compliance: When revenue generation is included, DAO-issued tokens may be considered securities, requiring compliance with registration and reporting rules, which can be challenging due to the decentralised nature of DAOs.

It is important to conduct thorough research, consult legal and financial experts, and assess the specific risks and regulatory requirements associated with opening a DAO for your own purposes. However, with their trajectory towards driving purposeful collaboration at scale, increasing participation, promoting transparency and fostering inclusivity, DAOs have the potential for significant impact within the conservation space.

The following are just a few ideas of what cryptocurrencies and tokenization could potentially enable for nature conservation:

1. New ways for conservation NGOs to engage with members

DAOs have been used in various sectors to manage memberships and fan clubs in a manner that can be adapted to the conservation sector. Conservation NGOs forming a DAO can empower their members with increased influence and decision-making power, enhance transparency and accountability in the use of resources and create opportunities for education and engagement with the dilemmas faced in the conservation sector. Collaboration and information-sharing among members may also lead to greater consensus and support for conservation initiatives. The conservation NGO itself may potentially benefit from improved decision-making by tapping into the collective intelligence of its members, increasing engagement and support and attracting new and younger audiences valuing innovative solutions and interested in being part of a more inclusive and democratic organisation. This potentially includes individuals from diverse cultural, socio-economic and geographic backgrounds who might not have been previously involved with the NGO.

2. Democratised grantmaking and funding schemes

DAOs have the potential to democratise grantmaking by allowing any group to come together and establish grant schemes that are more adaptable and responsive to emerging conservation needs. Involving grantees, affected local communities and other stakeholders as members can increase their agency in decision-making, resulting in a more equitable, effective and widely accepted distribution of resources. Direct and transparent impact monitoring can relieve reporting pressure and automate reporting requirements, freeing grantees to focus on conservation work. Furthermore, decentralisation and the binding of funds to smart contracts can provide sustainable and reliable funding, avoiding risks associated with traditional grantmaking models. DAOs' potential to facilitate large-scale collaboration may also mean applying this concept to even bigger governmental or multilateral environmental funds, such as The Global Environment Facility (GEF). In summary, DAOs can potentially offer a more transparent, democratic and sustainable process that empowers grantees and local communities while ensuring efficient and effective use of resources.

3. Conservation partnerships and coalitions

In this model, NGOs could come together to form a DAO with a shared governance structure and mission, pooling resources and knowledge to work towards common conservation goals while maintaining their independence and autonomy. The DAO's protocol can encode the rules and principles of the partnership and the use of smart contracts and blockchain would provide a secure and transparent record of transactions and decision-making, thereby increasing trust and accountability among partners. Additionally, a DAO may allow for more democratic decision-making on how to allocate resources and prioritise projects, with a more inclusive process that promotes equal representation of organisations from underrepresented localities or sizes. This could help to build stronger partnerships and more effective conservation efforts.

4. From peer review to public review

DAOs have the potential to democratise scientific operations, including the peer review system, by creating a decentralised network of reviewers who can securely and transparently evaluate scientific works and come to a consensus on their quality and validity. This approach could help reduce bias and increase the objectivity of the peer review process, aided by some level of anonymity. Reviewers can be incentivised by a democratic scoring system that assesses their professionalism, accuracy and trustworthiness. Additionally, because the review process is recorded on a blockchain, it would be tamper-proof, providing a permanent and immutable record of the evaluations and promoting transparency in the scientific community.

5. Fostering sustainable landscapes

DAOs may promote sustainable landscape initiatives through resource pooling, accountability, incentivisation, and partnership building. Smart contracts can automatically distribute funds based on performance metrics related to sustainable practices, incentivising farmers to adopt sustainable practices and rewarding positive environmental impact. This decentralised, data-driven approach promotes transparency and accountability, ensuring the effective use of resources to achieve sustainable landscapes.

6. Creating new, big market forces to drive change

Large companies might be reluctant to adopt sustainable practices due to economic disincentives, a lack of willingness from the public to pay extra for sustainable products and the need to generate short-term profits for shareholders, among other risks. A public-led DAO, comprised of a large, cross-border collective, could be established to incentivise environmental changes by leveraging collective purchasing power. The DAO could manage a fund to reward companies for meeting sustainability goals or sanction those that don't. Smart contracts could guarantee that companies receive long- or short-term revenue upon moving towards their targets, helping to mitigate shareholders’ concerns. By providing companies with the funding to make the transition, and relying on blockchain to promote trust, this market incentive could be appealing and drive companies to change.

7. Promoting the implementation of the Global Biodiversity Framework

DAOs could play a role in the implementation of the Global Biodiversity Framework (GBF) by providing a decentralised platform for multilateral collaboration and decision-making among government agencies, conservation organisations and local communities. By pooling resources and funds for conservation initiatives and establishing a set of rules and metrics for their use, a group of governments or organisations could use a DAO to coordinate large-scale biodiversity conservation efforts across multiple jurisdictions. This could help promote greater equality, transparency and accountability in resource allocation for the implementation of the GBF and shift power dynamics within the conservation sector to a more democratic and decentralised system.

1. EarthFund is a global treasury with the aim of simplifying philanthropy in the Web 3.0 era. The platform facilitates the no-code creation of ‘for-good’ DAOs, reducing the barrier to entry for both individuals and organisations who wish to create decentralised communities improving human and planetary wellbeing. They describe themselves as a ‘GoFundMe on the blockchain’.
   
   
2. KlimaDAO specialises in the carbon economy and acts as a bridge between Web 3.0 and the traditional carbon markets, with each KLIMA token representing a real-world carbon asset and flows of capital being directed towards high-impact carbon projects. They class themselves as pioneers in the Regenerative Finance (ReFi) movement, creating a cycle of growth by removing carbon supply in the traditional market, thereby accelerating the cost of carbon assets and incentivising faster low-carbon innovation and adaptation by companies.
   
   
3. Moonjelly Foundation aims to create a new impact economy focussed on science-based ocean conservation that enables investors to find and support global ocean conservation efforts. They raise awareness of the need to find new ways to fund social goods that are not reliant on traditional approaches. In the foundation’s words, “We can’t solve a decentralised crisis with a centralised solution”.
   
   
4. Big Green DAO, founded by Kimbal Musk (brother of Elon Musk), is a registered US non-profit dedicated to grantmaking for food and gardening organisations in the US. The Big Green DAO puts the decision-making power in the hands of the non-profits that make up its community.
   
   
5. Green Initiative DAO is an impact-driven fund established by the Singapore non-profit, Green Cultural Travel Hub Limited. It aims to be a hybrid DAO with funds held in real assets, in which the community will vote to invest in sustainable agriculture, tourism, communities and innovation projects.

Here are things to consider:

1. All considerations in previous chapters: Smart Contracts, Blockchain and Web 3.0, Cryptocurrencies and Tokenization and NFTs.
   
   
2. Suitability for purpose: Be clear on the purpose of forming a DAO and determine whether a decentralised approach is truly necessary. While there are benefits to using DAOs, there may also be challenges in governance efficiency. For instance, frequent decision-by-vote can slow progress. In some cases, a traditional, centralised organisation may be more suitable for achieving tangible outputs and goals. Consider a cost-benefit analysis and alternative solutions in order to make an informed decision.
   
   
3. Governance structure: To establish an effective governance mechanism for a DAO, factors such as voting mechanisms, transparency, community engagement and adaptability must be taken into careful consideration. Clearly outline the decision-making process, voting rights and the role of community members in the governance structure, and establish a transparent dispute resolution process to address any issues that may arise within the community.
   
   
4. Membership criteria: Establish clear criteria for membership and consider whether you want an open or restricted membership policy. It’s a spectrum, with an open policy on the one side, meaning that anyone can join and participate in the decision-making process, and a restricted policy on the other, which limits membership to certain individuals or entities. Another consideration is whether you want to maintain anonymity for members. This can be important in some cases, especially if the decision-making process involves sensitive or controversial issues. However, it may also hinder trust and accountability within the group.
   
   
5. Token economics: Develop a token economic model that incentivises participation and aligns the interests of community members with the DAO's goals. Determine a fair and transparent token distribution method. Who can buy and how to sell? Exit options such as token redemption may be necessary to handle community members who choose to leave.
   
   
6. Knowledge and accessibility: The potential of DAOs to foster inclusivity can be hindered by barriers such as participants' technical knowledge and available resources. Make sure to evaluate the willingness and ability of stakeholders to participate and take steps to ensure their effective and inclusive involvement. This can involve providing education and outreach to address potential barriers.
   
   
7. Representation, voting power and decentralisation: Continuously evaluate the fair representation, voting power and level of decentralisation within your DAO and work towards optimising these factors over time. For instance, DAOs can implement a ‘one person, one vote’ policy, regardless of token holdings.
   
   
8. Balancing expertise and democratic decision-making: DAOs often operate on the principle of democratic decision-making, which, while inclusive, can sometimes lead to decisions that may not align with the best scientific or practical approaches to conservation, especially when influenced by trends or popular opinion. To mitigate this, aspire to implement mechanisms that can balance expert input with collective decision-making. Additionally, educating the DAO community on various conservation issues and strategies can further strengthen decision-making quality.
   
   
9. Legal compliance: DAOs may or may not have monetary incentives, but if your DAO will include such incentives, it is important to comply with relevant laws and regulations related to securities, money transmission and taxes. Ensure the DAO's compliance with the laws and regulations of the jurisdiction in which it operates and consider its legal structure.
   
   
10. Cyber security: Prioritise smart contract security and implement strong measures to prevent potential vulnerabilities and exploits that could lead to significant financial losses in your DAO.
    
    
11. A sense of community: DAOs are online communities that require a strong and engaged group to thrive. Ensure this by promoting engagement, open communication and the empowerment of members. Provide regular updates on progress and financials and encourage engagement through multiple channels, such as forums, social media and events to foster a sense of community.
    
    
12. Flexibility: Be open to change and evolution, as the ecosystem and community may evolve over time and the DAO should be adaptable to those changes. Consider the use of modular smart contracts to make it easier to upgrade and modify the DAO as needed.
    
    
13. Scalability: Consider the scalability of the DAO's infrastructure and design it to handle potential growth in membership and usage.
    
    
14. Funding: Consider the funding model of the DAO – will it be self-funded through token/membership sales or another method?
    
    
15. Staying up to date: DAOs are a new and rapidly evolving technology and best practices are still being developed. Stay up to date with the latest developments in the field and seek advice from experts in the field of blockchain, smart contracts and governance.

• An introduction video to Decentralised Autonomous Organisations (Video, 2017)
• The company which consists only of computer code | Christoph Jentzsch (Video, 2017)
• Decentralised Autonomous Organisations: Beyond the Hype | World Economic Forum (Report, 2022)
• How Web 3.0 Can Help Conservation - an insight piece by Linwood Pendleton (Unearthodox, 2023)
• DAOs - The New Coordination Frontier (Report, 2021)
• Are DAOs the business structures of the future? (Article, 2022)
• State of the DAOs #3 | Overview of the DAO Ecosystem (Report, 2021)
• Explore insights into the growing DAO ecosystem via DeepDAO’s analysis of DAOs data (Website)